Introduction

Abstract

Starting in the 1970s and following a generalized trend towards enhancing the role of price signals in the general economy, central banks (CBs) around the world, starting with those in advanced economies, have moved away from administrative and rules-based instruments towards reliance on money market operations which they conduct as one participant in financial markets (i.e., open-market operations).¹ CBs in emerging market economies and developing countries have followed a similar path to a point where the practice of central banking has converged worldwide. In particular, in countries with developed capital markets, CBs have evolved from being governments’ tools for achieving specific economic objectives into independent institutions devoted to maintaining a fundamental public good: price stability.